Rebuilding public services
The issues

Public services for the 2020s

Over the past year, there has been an outpouring of appreciation for NHS staff, carers and other workers delivering key public services under extraordinary strain. At the same time, the pandemic has exposed a certain lack of resilience within these services, compromising our ability to respond to Covid-19 in an effective and fair way, even despite the best efforts of public servants.

The task beyond Covid-19 is to rebuild public services so they are better equipped to handle future challenges - both acute shocks, such as another pandemic, and chronic pressures such as our ageing population. Public services will also play a crucial role in achieving long-term shared national goals, such as decarbonisation or tackling regional inequality, and should be managed with these in mind. Other insights from our experience of Covid-19, including the centrality of digital access and data governance, should shape future public service provision.

The resources in this section bring together evidence on pre-Covid trends in public service provision - spending cuts, outsourcing, centralisation - and suggestions for how to rebuild these services in the wake of crisis.

Many argue that public services and social security must complement each other and be seen as part of the same system - please see our “Improving work and welfare” pages for further relevant resources.

Funding public services

In the decade before the pandemic, public services saw "the longest sustained squeeze in public spending on record”. Analysis from the Institute for Government found that underfunding left “public services entered the crisis with ailing performance levels, severe staffing pressures and having underinvested in buildings and equipment”, undermining resilience in these services by the time the pandemic hit.

Rebuilding resilience in public services will require increases in their funding. Our ageing population is also likely to require higher spend per capita on health, care and other services to maintain service quality. There is also popular demand for spending more on public services.

Supporting a higher level of spending on public services will require tax reform, both to raise sufficient revenue and to ensure it is raised fairly. Others, including the Financial Times editorial board, have argued policymakers “must see public services as investments, rather than liabilities”, with implications for how spending on public services is treated within fiscal frameworks.

Please see our section on taxation for more relevant resources.

Local public services

The United Kingdom - especially England - has a highly centralised political system and economic geography. Decision-making power is far more concentrated in central government than in comparable Western countries, and regional inequalities in income, wealth and health are almost uniquely pronounced.

The centralised management of public services has been a contentious topic during the pandemic. Many have argued the Government’s “over-centralised” response impeded effective provision of services, particularly with respect to public health and test-and-trace.

Covid-19 has also drawn attention to the financial fragility of many local authorities, which impedes their ability to provide public services. In 2020/21, English local authorities’ spending power was 26% lower than a decade prior. This period also saw population growth of 7%, rising demand and cost pressures, and new statutory duties for councils relating to public health, social care and homelessness.

For more relevant resources, please see our sections on health and social care, stronger local economies and regional inequality.

Outsourcing, procurement and public sector capacity

A string of high-profile failures and corruption allegations (e.g, Test-and-Trace, Ayanda Capital) during the Covid-19 has increased scepticism surrounding the value of and processes surrounding the government’s use of outsourcing and procurement.

In the decades prior to the pandemic, the government had come to increasingly rely on private providers to deliver public services, leading to a fall in the public sector’s capacity to deliver services ‘in house’. In 2018, following the Carillion scandal, the auditor general claimed that “there are lots of areas where the government does not have the capacity to do anything else but outsource”.

The result is a “gravy train”, whereby an over-reliance on the private sector and flawed contracting models mean that consultants and private companies like Carillion can make huge sums of money from government contracts, even if they deliver poor quality services. This is especially true during a shock of the magnitude of Covid-19, when services need to be rolled out quickly. Many have called for wholesale reassessment of the Government’s handling of private services providers following the pandemic.

See also the section below on public sector pay and recruitment for relevant resources on rebuilding public capacity.

Public sector workforce: recruitment and pay

In the decade before the pandemic, public sector pay fell behind the rising cost of living, so that in real terms public sector workers earned £900 less per year in 2020 than they did in 2010. Some workers have seen particularly sharp falls in pay, including teachers (£1349), local government residential care workers (almost £1900), firefighters (£2508) and early career nurses (over £3000).

In this context, the Government’s recent restraint on public sector pay has attracted criticism. First, many claim it undervalues the work of millions of public sector key workers who have already seen a decade of pay cuts. Second, economists of all stripes have questioned the wisdom of cutting wages while simultaneously trying to stimulate economic recovery. Third, some fear public sector pay restraint will exacerbate inequalities, as women and those living in poorer regions of the UK are disproportionately likely to work in the public sector.

The longer-term issue is building public sector capacity. Before the pandemic, public sector wages had fallen to a 25 year low relative to the private sector. At the same time, funding cuts have led to increased pressures on workers, further exacerbating recruitment and retention difficulties. In the short-term, pain in the private sector labour market and heightened interest in public service are likely to ease recruitment problems. Without efforts to reverse longer-term trends, however, we risk further undermining public sector expertise - leading to increased reliance on outsourcing - and failing to rebuild resilient public services after Covid-19.

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